Plan to tax the exempt is on ice

December 28, 2012

By

Russ Olivo

WOONSOCKET â€“ A plan to begin sending property tax bills to some organizations that have traditionally been exempt is apparently on ice after the Budget Commission split on the issue in a 2-2 tie Thursday.
With Mayor Leo Fontaine absent due to an illness, Commission Chairman Bill Sequino and Peder Schaefer voted not to send out the tax bills, while Dina Dutremble and City Council President were in favor of doing so.
Based on the split, Tax Assessor Christopher Celeste says itâ€™s unclear what he should do and heâ€™s going to need a formal legal opinion before he moves one way or the other.
â€śIâ€™m going to have to seek some legal advice now on what my obligations are going forward as Iâ€™ve been given no clear direction from the commission,â€ť said Celeste.
Ward, however, was flabbergasted by Celesteâ€™s position, particularly since the tax assessor is already in possession of legal opinions that a number of organizations currently listed as tax exempt should, in fact, be on the tax rolls. Those opinions obligate him to add the properties to the tax rolls, he contends.
â€śSo heâ€™s not going to do his job?â€ť said Ward. â€śWow. Heâ€™s fighting really hard against this...this is disturbing to me.â€ť
Celeste, who began auditing non-profits, civic groups and charitable outfits in March for possible revocation of their tax exempt status, said he started out with a list of roughly 60 possible targets.
Based on the advice of tax lawyer Michael McElroy, it has been determined that only a fraction of those should be paying property taxes. Though he declined to say who they are, a few names have leaked out in open discussion, including the Stadium Theatre Foundation, which owns the Stadium Theatre; Seven Hills Rhode Island, Inc., a Worcester-based psychiatric services organization that owns One Cumberland Street, one of the cityâ€™s largest office buildings; and Family Resources Community Action Program, which owns several parcels, among them its pie-shaped headquarters located at Main and Clinton streets.
What Celeste does say about the pool of new taxables is that they represent a total of roughly $17 million worth of real estate. Contrary to popular perception, however, Celeste says taxing the properties wonâ€™t bring in new revenue. What it will do is slightly expand the cityâ€™s $2 billion base of taxable property, relieving pressure to raise taxes on everyone else who receives a property tax bill.
The bottom line?
â€śIt really boils down to about 45 cents on the tax rate,â€ť he told commissioners.
Among members of the commission, Schaefer was the most vocal detractor of chasing the non-profits for new taxes. He cited the experience of East Providence, which is the only other financially struggling city that Revenue Director Rosemary Booth Gallogly has placed under the control of a state-appointed budget commission. Like Woonsocket, East Providenceâ€™s search for new flex room in its budget prompted an audit of non-profits, many of which have already been added to the tax rolls in that city.
Schaefer, however, said East Providenceâ€™s experiment may seem pennywise, but it could turn out to be a foolâ€™s errand. The city, he said, may face costly litigation in which the newly taxed organizations could ultimately prevail.
Woonsocket, he said, is similarly vulnerable because it does not have reliable data for the worth of the non-profits in question because they havenâ€™t been subject to professional appraisals in many years.
â€śTwo wrongs donâ€™t make a right,â€ť said Schaefer, the deputy director of the Rhode Island League of Cities and Towns. â€śThereâ€™s a lot of case law on this. I wanna watch East Providence go down the tubes when this doesnâ€™t work out.â€ť
In an interview, Celeste echoed Schaeferâ€™s concerns.
As a matter of fundamental fairness, taxpaying property owners should not be subsidizing organizations that should be paying their share, but arenâ€™t, he allows. As a practical matter, however, sending out tax bills based on flawed or incomplete assessments could result in litigation so costly it defeats the purpose of the initiative.
â€śThatâ€™s not going to help the city,â€ť he says.
Ward thinks Schaefer, and Celeste, are overreaching. Nobody knows who is going to sue the city after receiving a tax bill â€“ or if they will, he says; even if they do, so what?
â€śSome of these issues could be resolved very quickly,â€ť said Ward. â€śBut you canâ€™t get to that point until someone takes an action that causes the question to be asked.â€ť
Ultimately, Ward says Celeste really doesnâ€™t have any choice but to move forward with sending out tax bills to those already deemed deserving of them.
The question before the budget commission was whether to delay sending out the bills. The tie vote means Celeste has to act in a way consistent with the vote, according to Ward.
â€śA tie vote is a losing vote,â€ť said the council president.

Some quotations in this story were excerpted from material recorded by mywoonsocket.com